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Study: City earnings tax drives people away

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By AP/KWMU

St. Louis, MO – A new report by an economics professor at the University of Missouri suggests cities like St. Louis that have an earnings tax are driving people and businesses to the suburbs, and slowing personal income growth.

The report also cites Kansas City as such a city with the tax. "The earning tax distorts people's decisions on where to live and build a business," says professor Joseph Haslag.

Haslag says his data support the theory that a city's income growth is slowed compared to surrounding suburban areas if it taxes wages. The study was sponsored by the St. Louis-based nonprofit Show-Me Institute.

The study focused on Missouri's three largest cities, St. Louis, Kansas City and Springfield. Springfield was used as a control city, because it does not have an earnings tax.

St. Louis charges 1% of incomes from people who either live or work in the City. Kansas City and St. Louis adopted their earnings tax in 1947, when the Legislature approved such taxes for cities with a population of more than 70,000.

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